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Suppose that Croatia and Norway both produce boots and glass. Croatia's opportunity cost of producing a pane of glass is 5 pairs of boots while
Suppose that Croatia and Norway both produce boots and glass. Croatia's opportunity cost of producing a pane of glass is 5 pairs of boots while Norway's opportunity cost of producing a pane of glass is 11 pairs of boots. By comparing the opportunity cost of producing glass in the two countries, you can tell that Y has a comparative advantage in the production of glass and Y has a comparative advantage in the production of boots. Suppose that Croatia and Norway consider trading glass and boots with each other. Croatia can gain from specialization and trade as long as it receives more than V of boots for each pane of glass it exports to Norway. Similarly, Norway can gain from trade as long as it receives more than V of glass for each pair of boots it exports to Croatia. Based on your answer to the last question, which of the following prices of trade (that is, price of glass in terms of boots) would allow both Norway and Croatia to gain from trade? Check all that apply. [3 10 pairs of boots per pane of glass [3 9 pairs of boots per pane of glass [3 5 pairs of boots per pane of glass D 14 pairs of boots per pane of glass
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